Remarks by U.S. Ambassador David Shear Launch of the Provincial Competitiveness Index (PCI) 2012

Thursday, March 14, 2013

U.S. Ambassador David Shear addresses the PCI launch in Hanoi.

USAID/Vietnam

HANOI, March 14, 2013 -- It is my pleasure to join you today in launching the annual Provincial Competitiveness Index report for 2012. This event marks the eighth year of collaboration between the Vietnam Chamber of Commerce and Industry and the U.S. Agency for International Development in helping to improve economic governance and competitiveness across the country.

The PCI is a barometer of private sector perceptions about the business environment in Vietnam. It is a useful tool for provincial leaders to identify areas in which reforms or improvements are needed. Since 2005, over 50 provinces have used the PCI to highlight strengths, identify the best models, and address weaknesses in economic governance.

Provinces' scores are examined closely by local and foreign investors, development partners and the public. We congratulate the many provincial leaders who understand this fact, and who engaged in a public-private dialogue to build consensus about needed improvements, and who took specific actions to improve the business environment in their provinces.

The 2012 PCI highlights the importance of economic governance in attracting investment, creating jobs, and fostering growth, particularly when economic conditions generally are tough. This year the PCI highlights continued efforts by many provinces in the Median range to make improvements such as shorter waiting periods for business registration and licensing, and declining petty corruption. The survey recommends further improvements in such areas as land compensation prices; provincial legal institutions; support of local leaders for private business; and improvement of business support services from provincial authorities.

This year's survey also demonstrates the importance of maintaining focus on economic governance. There was a decline in governance overall, and no single province reached the Excellent threshold of 65 points. This decrease may reflect businesses' preoccupation with a difficult economic climate, but it also implies that provincial governments and the central government need to work better together to tackle pending nationwide reforms on hard issues such as land, corruption and transparency. The "ceiling" for all PCI scores that we observe over time may indicate that these nationwide challenges are at least partially holding back further improvements.

The report also provides a snapshot of the views of 1,540 Foreign Invested Enterprises (FIE) on Vietnam's investment climate. For the first time, the FIE survey provides insights on how risk is perceived in the Vietnamese business environment and what strategies investors are taking to mitigate these risks. While this feedback doesn't affect the PCI rankings, it provides useful insights for policy-makers in devising appropriate solutions for attracting investment. Consistent with recent decline in economic growth, foreign invested firms' performance this past year and optimism about the year to come are at their lowest levels since the FIE survey began three years ago. This is a difficult trend for those dedicated to Vietnam's robust development.

This year's survey noted an increase in corruption for large scale public procurements even as petty corruption continues to decline. The private sector has a key role to play in combating this corruption, and a healthy dialogue is an important first step toward reform.

Provincial governments can also show leadership in improving transparency, one of the most effective means of improving your PCI score, through programs like those sponsored by the Bill and Melinda Gates Foundation in partnership with the Ministry of Information and Communications. This initiative provides internet access for rural populations, which improves access to local development plans and business regulations. It also creates new educational opportunities for both old and young alike. Transparency contributes to accountability, which is central in a successful partnership between the government and the governed.

In short, the PCI continues to contribute to economic governance and the ease of doing business in Vietnam. We are gratified that with VCCI's leadership it has proven so important and relevant, but we encourage provincial governments to think broadly. An approach to development that enhances all factors relevant to inclusion, particularly of women, in economic activity will be the true formula for success. Thank you to the many private sector firms that responded to the 2012 PCI survey. Without your participation, the 2012 PCI would not be possible. I am confident that this year's report will foster new commitments by provincial and national authorities to improving economic governance for the benefit of all the people, of Vietnam.